Corn

USDA in this month’s report raised ending stocks 60 million bushels from July to 940 million bushels for the 2010/11 marketing year on 20 million bushel increase in food and seed, a 30 million bushel decrease in corn for ethanol, and a 50 million bushel reduction in exports. The season average price for 2010/11 is forecast to range from $5.20 – $5.30, an increase of 5 cents on the lower end and decrease of 5 cents on the top. World ending stocks for 2010/11 decreased 242 million bushels to 4.517 billion. Changes made in the 2011/12 projection on the production side were a 500,000 acre reduction in harvested acres and a 5.7 bushel per acre decrease in yield. Based on unusually high temperatures and below average rainfall in July across the Corn Belt, USDA estimated corn yields at 153 bushels per acre compared to the average trade guess of 155.2 bushels and last month’s estimate of 158.7 bushels. Production was reduced 556 million bushels from last month with overall supply reduced 496 million bushels to 13.874 billion bushels. Demand was reduced 340 million bushels as feed and residual use was reduced 150 million bushels, food and seed raised 10 million bushels, corn for ethanol cut 50 million bushels and exports reduced 150 million bushels. Ending stocks for 2011/12 are projected at 714 million bushels, a decrease of 156 million bushels from July and lower than the average trade guess of 741 million bushels. The stocks to use ratio is estimated at 5.4%, which if realized would be the 2^nd tightest in modern history. The season average price projected to range from $6.20 to $7.20 a bushel, an increase of 70 cents on both ends. Global corn stocks are estimated to decrease 44 million bushels from the July report to 4.509 billion bushels on higher beginning stocks and decreased production in the U.S. and decreased usage. Global consumption was lowered 342 million bushels as competitively priced feed quality wheat is expected to displace corn usage.  September corn closed up 24 ½ cents at $7.02 ½ a bushel on what is considered a bullish corn report. Technical’s have a buy bias with support at $6.64 and resistance at $7.28 a bushel. I am currently 50% forward priced for 2011 and 25% priced using a December $6.90 Put option locking in a futures floor of $6.34. Depending on the U.S. and World economic situation, corn should remain stable and possibly strengthen as we head into harvest.  Over the past 30 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 411 million bushels with 15 years below the final estimate and 15 years above.  These numbers can and will change, but do reflect the best information and estimates at the time of the report. The next USDA Supply & Demand report will be released September 12, 2011.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA’s projection for the old crop marketing year estimates U.S. ending stocks at 2.85 million bales, up 100,000 bales from the July report  on a 100,000 bales decrease in exports, reflecting continued cancellations and slow shipments.  This puts the stocks to use ratio at a 15.7% with the season average price left at 81.5 cents per pound. World ending stocks were raised 590,000 bales to 44.99 million bales for the current marketing year. The 2011/12 marketing year reflects higher ending stocks at 3.3 million bales on a 550,000 bale increase in production from last month. Production is estimated at 16.6 million bales, 1.3 million bales higher than the midpoint of trade guesses. Exports were raised 300,000 bales due to the larger supply. The projected price range for 2011/12 was lowered 5 cents on both ends at 85 to 105 cents per pound. The stocks to use ratio is estimated at 20.5%, still historically a tight ratio. World projections reflect higher beginning stocks, lower production, and lower usage compared to July. Demand reflects continued weakness in fiber demand and increased substitution of polyester for cotton.  Global ending stocks are expected to increase 1.66 million bales to 52.66 million bales. This is a neutral to bearish report for cotton as stocks both in the U.S. and world are projected to increase. December futures closed at 96.52 cents per pound, down 1.28 cents.  Technical’s have a strong sell bias with support at 93.64 cents and resistance at 100.80 cents. Keep in contact with your cotton buyer on current prices as well as forward pricing alternatives. I would be 45% priced at this time. Over the past 30 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 1.6 million bales with 12 years below the final estimate and 18 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report.                                                                                                               

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

USDA, as about expected, raised old crop ending soybean stocks 30 million bushels from last month to 230 million bushels for the current marketing year. Crush was lowered 5 million bushels on reduced soybean meal exports and exports were lowered 25 million bushels on lower than expected shipments in recent weeks. The season average price for 2010/11 was left at $11.35 a bushel.  Global ending stocks for 2010/11 were raised 93 million bushels at 2.514 billion bushels. Surprises were made in U.S. new crop production as yields were reduced 2 bushels per acre from July to 41.4 bushels per acre. Harvested acreage was reduced 500,000 acres ( mainly in South Dakota) resulting in production of 3.069 billion bushels, a reduction of 169 million bushels from July and 103 million bushels less than the average trade guess. Ending stocks for 2011/12 are decreased 20 million bushels from last month to 155 million bushels as a 20 million bushel cut in crush, 95 million bushel reduction in exports and a 4 million bushel cut in residual use offsets some of the cut in production. The trade was looking for a stocks number of 172 million bushels. The season average price for 2011/12 is estimated to range from $12.50 to $14.50 a bushel, up 50 cents on both ends. Stocks to use ratio is projected at a tight 4.9%.  World ending stocks for 2011/12 are projected to decrease 37 million bushels from the July estimate to 2.240 billion bushels. November soybeans closed up 30 ½ cents at $13.32 per bushel. Technical’s have a sell bias with support at $12.67 and resistance at $13.87 a bushel. Although it is not showing in price movement today, analyst are  having a harder time with the reduction in yield as even though July conditions were not the best for soybeans, August is generally considered the critical month for soybeans. In weekly comments, I am currently 50% priced for 2011 and have locked in a $13.21 futures floor with a November $14 put option on 25% of production. Weather will still influence soybean prices not only in August and early September but also as we go into Fall with a late crop and the possibility of an early frost. Over the past 30 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 99 million bushels with 9 years below the final estimate and 21 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report.  

Supply and Demand Projections and Historical Data Source: USDA

Wheat

U.S. projections for 2011/12 reflect lower production based on a 1.3 million acre decrease in harvested acres and a .60 bushel per acre increase in yield. Ending stocks were left virtually unchanged at 671 million bushels, a 1 million bushel increase from last month. Usage was lowered 30 million bushels with exports projected down 50 million bushels with increased foreign competition; feed and residual use is raised 20 million bushels reflecting a competitive pricing for feed wheat compared to corn and lower corn supplies. The season average price is estimated to range from $7.00 to $8.20 a bushel, up 40 cents on the bottom side and down 20 cents on the top side. World ending stocks are projected at 6.940 billion bushels, up 246 million bushels from the July estimate as world production increased more than consumption. September wheat closed up 16 ¼ cents at $7.01 ¼ a bushel. Technical’s have a sell bias with support at $6.58 and resistance at $7.44 a bushel. July 2012 wheat closed at $7.91 ¾ , up 14 ½ cents. Overall, this report was neutral to bearish wheat, but wheat is following the corn market for the time being. Over the past 30 years the average difference between the August projection for U.S. ending stocks and the final estimate has been 114 million bushels with 16 years below the final estimate and 14 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. The next USDA Supply & Demand report will be released September 12, 2011.

Supply and Demand Projections and Historical Data Source: USDA

2012 Profitability Outlook

This table should be used as a guide as yields, prices, and expenses will vary among producers and locations. Since producers will soon be making decisions on planting wheat for 2012, I am starting to look at projected profitability for the 2012 crop year. Please note that the table below reflects 2012 profitability. This table looks at crop prices as of August 11, 2011 for 2012 and can give a glimpse of what crop profitability is in Tennessee as of this date. One of the expense items that has to be watched is fertilizer. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: cotton – $ 148, Soybeans – $51, Corn – $169 (includes 150 units of N), and Milo – $134. Production cost will be updated as new information for 2012 becomes available. Please Visit with your farm supplier on estimated cost in your area. Producers with owned land and or cash rent can use Returns Over Variable as a guide in decision making. Producers with share rent ground should use Returns Over Variable and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. Producers who are not making major equipment changes can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid. Please contact your local County Extension office or Area Specialist – Farm Management for assistance in developing your own budget or farm financial plan.

Some differences have occurred due to rounding.